Less than 50% read the small print - Confusion over meaning of terms like ‘Act of God’

New research has revealed fewer than 50% of people read the small print on insurance, loans and credit card agreements, according to price comparison website BeatThatQuote.com. The small print is traditionally home to specialist terms such as ‘Act of God’ - finance jargon that most people don’t really understand. Not taking time to read the small print is a recipe for disaster when it comes to clarity over the exact terms and conditions of a personal finance agreement, but confusion still abounds in matters of finance.

Mainstay money myths include the belief that you can write a cheque on anything such as the story about a cheque that was written on the side of a cow that was honoured and actually cashed by a bank. The more credible myths, such as shopkeepers being obliged to sell merchandise at the advertised price even if it’s incorrect, highlight the extent to which some UK consumers unwittingly believe financial fiction.

BeatThatQuote.com debunks some of those myths…

Illegal Tender

The term legal tender has slipped into common usage to mean money. But what it really refers to is the currency denominations in which debts can be discharged in a court of law following a county court judgement. For instance, it’s not legal to pay a debt of £50 in 1p pieces. The maximum amount you can pay in 50p or 20p coins is £10 and 10p or 5p coins are only valid up to a fiver, whilst 1p or 2p coins are only accepted to a maximum of 20p!

The price is wrong, even if it’s right

Shopkeepers are not obliged to sell merchandise at the advertised price, and can refuse to deal with you completely if you aren’t agreeable to this. And they don’t even have to give you change! If a customer decides to pay more than the asking price, by law, the shopkeeper can accept this contract of payment and is perfectly entitled to cough up the difference only at his or her discretion. Although clearly, if they did this, they wouldn’t get very many repeat customers!

Insuring Acts of God

Earthquakes, floods, storms and other natural disasters are often referred to in general legalese as ‘Acts of God’. The common belief is that insurance policies exclude such events – but in fact, they are covered under most domestic insurance policies, although plagues of frogs and locusts are the exception!

“Disputes lie not so much in unscrupulous retailers but in misunderstandings when customers don’t take the time to understand what exactly it is that they’re signing,” said Sophie Neary, Director of BeatThatQuote.com “The small print is hateful but it’s there for a reason, and not taking the time to read it is not an excuse.”

Money myths debunked

Myth: Suicide isn’t covered on life insurance

Yes it is. Some policies may exclude cover for an initial period (i.e. within the first 24 months of the policy being taken out), but it is now more likely than not to be covered – although nothing would be paid for an attempted suicide.

Myth: You can legally use anything as a cheque

Urban myth has it that a cheque written on the side of a cow was once accepted and cashed by a bank. But while a bank may honour a cheque written on anything so long as all the details are correct, acceptance is entirely at the bank’s discretion.

Myth: Once I have bad credit, it’s with me for life

Not true. Poor credit ratings can be redeemed by consistent on-time payments. Setting up direct debits will rectify late payments, while ensuring you’re on the electoral register will confirm lenders of your identity. Also, avoid making a series of credit applications if one lender turns you down, as this looks desperate.

Myth: Shopkeepers are obliged to accept payment for goods with stamps because it’s legal tender

Only sterling is legal tender in the UK. Although shopkeepers are welcome to accept stamps, or anything else including dollars and euros, they are not obliged to accept any form of payment at all – even sterling!

Myth: It’s cheaper to pay for motor insurance monthly

No it isn’t. Most insurers will charge an APR in the same way as if you were taking a loan. If you can’t find the premium in one go, paying monthly is an option, but you could also pay on a 0% credit card.

Myth: My rebuilding cost is the same as the value of my home

Cost is affected by area, type of property, and the materials used. The sum insured under a buildings policy must be the full rebuilding cost of the home, so this is usually less than the actual property value. For a Hertfordshire house valued at £360,000, rebuilding costs would be based on £132,000 (for an averaged sized semi-detached of 120 square metres).

-ENDS-

Notes to the editor:

About BeatThatQuote.com

BeatThatQuote.com is price comparison web site that helps people find the very best deals on a range of financial products and services that includes mortgages, credit cards, loans, home and car insurance, annuities and investments.

BeatThatQuote.com is an independent company owned by the people who work there. In 2006 it won the Growing Business Awards ‘Young Company of the Year’ award as well as being the NatWest Startups ‘Business of the Year’ and ‘Online Business of the Year’ winner. BeatThatQuote.com also reached the national finals in the Orange National Business Awards, the Women of the Future and the HSBC Start-Up Stars awards.